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Oil hits four-year high ahead of Iranian pact decision

by LLB Reporter
8th May 18 7:53 am

Here’s what you need to know

Whilst Wall Street closed higher on the day, the real action was in the oil markets. Oil extended gains from the European session into the start of the US session, easing back only after Trump announced a decision will be given tomorrow at 2pm EST over the Iranian nuclear pact.  

Oil has rallied hard on Venezuelan supply concerns and rising tensions between Iran and US. Repeated criticism from Tump over the US Iranian nuclear disarmament deal, has traders fearing that a withdrawal from Trump could see US sanctions being re-imposed on Iran. These sanctions would almost certainly include reductions to the country’s oil exports, jolting the oil market and lifting the price of oil in recent sessions.

London Capital Group said: “Prior to Trump’s informative tweet, both oil and energy stocks were rallying hard with crude at a 4-year high and the Dow up some 200 points. However, the tweet stopped any rally firmly in its tracks, with oil easing back to $70 per barrel and energy stocks, which had been up by as much as 2.3 per cent at one point, ending the session just 0.1 per cent higher. The Dow and the S&P closed 0.4 per cent higher, whilst the Nasdaq rallied 0.8 per cent, as shares in Apple continued to cheer yesterday’s Buffet news, but overall optimism was waning with some scepticism setting in.”

The tweet by Trump was rather unexpected, given that the US – Iran nuclear pact deadline runs until Saturday 12th May. Usually an earlier than expected announcement from negotiations could be considered a positive sign, but the markets are not so sure this time round, which may be wise given Trump’s unpredictability. That said, the sell off in oil could just be a sign of a spoked market that was caught off guard, longer than it intends to be with such a big risk event suddenly upon it.

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